Medtronic, Inc.; Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 981-0324]

Medtronic, Inc.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before December 7, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., NW, Washington DC 20580.

FOR FURTHER INFORMATION CONTACT:

William Baer, FTC/H-374, Washington, DC 20580, (202) 326-2932 or Ann

Malester, FTC/S-2308, Washington, DC 20580, (202) 326-2820.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's

[[Page 53920]]

Rules of Practice (16 CFR 2.34), notice is hereby given that the above-

captioned consent agreement containing a consent order to cease and

desist, having been filed with and accepted, subject to final approval,

by the Commission, has been placed on the public record for a period of

sixty (60) days. The following Analysis to Aid Public Comment describes

the terms of the consent agreement, and the allegations in the

complaint. An electronic copy of the full text of the consent agreement

package can be obtained from the FTC Home Page (for October 1, 1998),

on the World Wide Web, at ``http://www.ftc.gov/os/actions97.htm.'' A

paper copy can be obtained from the FTC Public Reference Room, Room H-

130, Sixth Street and Pennsylvania Avenue, NW, Washington, DC 20580,

either in person or by calling (202) 326-3627. Public comment is

invited. Such comments or views will be considered by the Commission

and will be available for inspection and copying at its principal

office in accordance with Section 4.9(b)(6)(ii) of the Commission's

Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted, subject

to final approval, an agreement containing a proposed Consent Order

from Medtronic, Inc. (``Medtronic''). The proposed Consent Order

contains a number of provision designed to remedy the anticompetitive

effects resulting from Medtronic's acquisition of Physio-Control

International Corporation's (``Physio-Control'') automated external

defibrillator business and its ownership interest in SurVivaLink

Corporation ``SurVivaLink), a direct competitor of Physio-Control.

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the proposed Order.

On June 27, 1998, Medtronic entered into an Agreement and Plan of

Merger with Physio-Control to acquire all of the voting stock of

Physio-Control in exchange for Medtronic voting stock valued at $530

million. The proposed compliant alleges that the transaction, if

consummated, would constitute a violation of Section 7 of the Clayton

Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as

amended, 15 U.S.C 45, in the market for the research, development,

manufacture and sale of automated external defibrillators.

Automated external defrillators are portable, automated devices

used in emergency situation, by persons with limited medical training,

such as policemen, firemen and lifeguards, to treat people suffering

from sudden cardiac arrest. The market for automated external

defibrillators is highly concentrated with only three significant

players in the United States: Physio-Control, SurVivaLink and Hewlett-

Packard/Heartstream.

The relevant geographic market is the United States. Only companies

that have received U.S. Food and Drug Administration approval to sell

their devices in the United States may supply automated external

defibrillators to U.S. customers.

In addition, new entry into the market for automated external

defibrillators is unlikely and would not occur in a timely manner to

deter or counteract the adverse competitive effects of Medtronic's

acquisition of Physio-Control. Entry into this market is unlikely and

would not be timely because of the time and expense required to design

and develop a competitively viable product, obtain approvals from the

U.S. Food and Drug Administration, and establish a sales and

distribution network.

Medtronic's acquisition of Physio-Control raises serious

competitive concerns in the market for automated external

defibrillators because of its ownership interest in SurVivaLink,

Physio-Control's direct competitor. Pursuant to an investment agreement

entered into between Medtronic and SurVivaLink, Medtronic was given the

explicit right to name a member to SurVivaLink's Board of Directors and

to receive certain non-public competitively sensitive information.

Medtronic also has the right to receive certain non-public

competitively sensitive information under Minnesota law. In addition,

Medtronic has the right as a shareholder in SurVivaLink to vote on all

matters requiring a shareholder vote. Medtronic's entanglements with

SurVivaLink and its acquisition of Physio-Control would cause

anticompetitive harm in the market for automated external

defibrillators by potentially eliminating direct competition,

increasing the likelihood of coordinated interaction, reducing

innovation and ultimately increasing prices for automated external

defibrillator customers.

The proposed Consent Order remedies the acquisition's

anticompetitive effects in the market for automated external

defibrillators by making Medtronic a passive investor in SurVivaLink

and by preventing Medtronic from exercising its right to name a member

to SurVivaLink's Board of Directors. The proposed Consent Order also

prevents Medronic from exercising its rights, pursuant to its

investment agreement with SurVivaLink or under Minnesota law, to

receive non-public competitively sensitive information relating to

SurVivaLink.

The proposed Consent Order also limits Medtronic's ability to vote

on any matter that requires a vote of SurVivaLink's shareholders by

requiring Medtronic to delegate its voting rights to be voted in a

manner proportional to the votes of all other shareholders. The propose

Consent Order would also prohibit Medronic from proposing any corporate

action or participating in any business decisions of SurVivaLink.

Additionally, the proposed Consent Order prevents Medronic from

increasing its ownership interest in SurVivaLink without prior written

notice to the Commission. Finally, the proposed Consent Order requires

Medtronic to return to SurVivaLink any documents that contain any trade

secrets, commercial information or financial information relating to

SurVivaLink.

Under the provisions of the proposed Order, Medtronic is also

required to provide the Commission with a report of compliance with the

provisions of the order within sixty (60) days following the date this

Order becomes final, and annually thereafter until such time as

Medtronic sells or transfers all of its ownership interest in

SurVivaLink or Physio-Control.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 98-26855 Filed 10-6-98; 8:45 am]

BILLING CODE 6750-01-M